Northern Trust CEO sees 12 percent pay hike

The total compensation of Northern Trust Corp. chief executive Frederick Waddell rose 12 percent to $14.3 million in 2011.

Some of the increase was due to stock and option awards granted last year for 2010 performance.

In its proxy filed with the Securities and Exchange Commission on Thursday, the Chicago-based financial services firm also disclosed an outreach campaign to two unnamed shareholders in early 2012. Northern's stock price is down 19 percent since the beginning of 2011. Net income and net income per share were down about 10 percent in 2011. Its one-year return on equity slightly lags its peers, although it's doing better over three- and five-year periods. Northern said that, as a result of the meetings, it revised some of its corporate governance practices, prompting those two shareholders to withdraw their planned shareholder proposals for the annual meeting next month.

In its proxy, Northern said that, in response to shareholder feedback, it had narrowed the list of firms in its compensation peer group to big trust and custody banks, as well as certain other U.S. banks. Companies use such peer group to set compensation. It also said that all new executive employment agreements won't include what are called excise tax gross ups, a practice where companies cover certain executive tax payments.

In response to regulatory concerns about all larger banks, Northern said that, to further discourage inappropriate risk taking, stock options have decreased from 50 percent of the total value of each executive officer's long-term incentive compensation in 2011 to one-third in 2012

The proxy still had a couple of shareholder proposals, however. One recommends that Northern split its role of chairman and CEO, two positions held currently by Waddell. Northern recommended a vote against it. Among other things, Northern said it has an independent lead director

Waddell's salary rose to $956,250 from $900,000. The pension value for the longtime Northern veteran increased to nearly $4.1 million from $3.3 million. "Other" compensation, including perks, increased from $75,527 to $88,672.

Stock awards rose from $3.5 million to $4 million, and option awards from nearly $3 million to almost $3.6 million.